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President Bush Signs H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007

President George W. Bush signs into law H.R. 3648, the Mortgage
Forgiveness Debt Relief Act of 2007, during ceremonies Thursday,
Dec. 20, 2007, in the Roosevelt Room of the White House.

THE PRESIDENT: “Thank you all for coming. Welcome to the White House. I'm pleased to sign a bill that will help homeowners who are struggling with rising mortgage payments. The Mortgage Forgiveness Debt Relief Act of 2007 will protect families from higher taxes when they refinance their homes. It will help hardworking Americans take steps to avoid foreclosure during a period of uncertainty in the housing market. I want to thank members of Congress for getting this bill passed. I appreciate it very much. It's been a joy working with you.”

“The bill I sign today will help this effort by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse. When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes.”

Click Here to Read Bill

The law applies to primary residences only and takes effect from January 1, 2007 through December 31, 2009. It will provide relief to home owners by shielding them from the additional burden of potential federal income tax on any amount written off or forgiven by their lender in case of foreclosure or short sale. Consult with an experienced tax professional to see how this new law applies in your circumstance.

Click Here - IRS Guidance regarding The Mortgage Forgiveness Debt Relief Act of 2007